Nippon Steel and the Tariff Tango: Navigating Uncertainty in a Shifting U.S. Market

The U.S. steel industry is in a state of flux, with tariff policies oscillating between protectionism and pragmatism. For Nippon Steel—the world’s second-largest steelmaker—this volatility poses both risks and opportunities. The company’s fate hinges on its ability to navigate the labyrinth of U.S. trade policies, from reinstated tariffs to stalled mergers and geopolitical brinkmanship.

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The Tariff Tightrope: U.S. Policies in 2025

Since March 2025, the U.S. has reinstated a 25% tariff on steel imports from Japan, Canada, Mexico, and the EU—countries previously exempt under temporary agreements. This move, under President Trump’s administration, aims to curb imports deemed threats to national security. The tariffs now extend to derivative steel products, such as fabricated structural steel, which account for nearly 20% of Nippon’s U.S. exports.

The chart reveals Nippon’s stock volatility, dropping 12% in Q1 2025 amid the tariff reinstatement, while U.S. Steel’s shares fell 18%—a reflection of investor anxiety over trade uncertainties.

The Merger That Won’t Die: Nippon’s Bid for U.S. Steel

Nippon’s $14.9 billion offer to acquire U.S. Steel—a deal that would have granted it 8-9% of the U.S. steel market—has become a political lightning rod. While the Biden administration blocked the merger in January 2025 citing national security risks, the Trump administration’s reopened CFIUS review has injected new hope. The crux? Foreign ownership vs. foreign investment.

• Biden’s Stance: The merger would concentrate global steel capacity (Nippon’s share rises to 4.5%), exacerbating overcapacity.
• Trump’s Compromise: Nippon could retain a minority stake or joint venture, avoiding full ownership—a structure that might pass scrutiny.

Legal Battles and Strategic Shifts

Nippon is fighting back. It filed a lawsuit in February 2025, alleging Biden’s decision was politically motivated, not security-driven. The case hinges on a key point: U.S. Steel supplies only 2% of military-grade steel, far below thresholds that would trigger CFIUS action. Meanwhile, Nippon is exploring alternative investments:

• POSCO’s Playbook: South Korea’s POSCO secured a $5.8 billion investment in a U.S. electric-arc furnace mill—a model Nippon could mimic. Such projects bypass tariffs by producing steel domestically.
• Mexico’s Melt-and-Pour Loophole: Nippon could partner with Mexican producers to meet Trump’s “melt-and-pour” requirement, avoiding steep duties on cross-border shipments.

The Cost of Uncertainty

The tariffs and stalled merger have exacted a toll. Nippon’s annual profit fell 36% in 2025, with U.S. exports now subject to tariffs on products like non-oriented electrical steel (hit by a 205% antidumping duty). Meanwhile, U.S. Steel’s shares trade at a 23.6% discount to Nippon’s offer price—a sign of market skepticism about regulatory approval.

The data underscores why Nippon needs the merger: China’s overcapacity alone will hit 325 million metric tons by 2030, dwarfing U.S. efforts to curb imports. Without scale, Nippon risks being outflanked in the race to supply U.S. automakers and infrastructure projects.

Risks and Rewards: What Investors Need to Know

• Upside: If the merger proceeds (even in a diluted form), Nippon gains a U.S. production base, shielding it from tariffs and positioning it to capture $50 billion in annual automotive steel demand.
• Downside: A permanent block leaves Nippon reliant on exports, now penalized by tariffs. Its profit margin, already squeezed by iron ore costs, could shrink further.

Conclusion: A High-Stakes Gamble

Nippon Steel’s future in the U.S. is a tale of two scenarios. In the best case, the CFIUS review leads to a revised merger structure, unlocking tariff-free access and a 9% market share. In the worst case, tariffs persist, overcapacity worsens, and Nippon’s stock languishes—a scenario reflected in its 12% year-to-date decline.

Investors must weigh the odds. The Trump administration’s focus on “America First” manufacturing could favor Nippon’s advanced technologies—such as hydrogen-based steelmaking—while penalizing Chinese competitors. Yet the political seesaw remains unpredictable. For now, Nippon’s fate is tied to a single question: Can it turn tariff uncertainty into an edge? The answer will shape the steel landscape for years to come.